Question
Suppose that you want to create a portfolio that consists of a corporate bond fund, X, and a common stock fund, Y. For a $1,000
Suppose that you want to create a portfolio that consists of a corporate bond fund, X, and a common stock fund, Y. For a $1,000 investment, the expected return for X is $ 84 and the expected return for Y is $ 100. The variance for X is 1,850 and the variance for Y is 14,375 The covariance of X and Y is 3,699.
a. Compute the portfolio expected return and portfolio risk if you put $ 200 in the corporate bond fund and $ 800 in the common stock fund.
b. Compute the portfolio expected return and portfolio risk if you put $ 500 in each fund.
c. Compute the portfolio expected return and portfolio risk if you put $ 900 in the corporate bond fund and $ 100 in the common stock fund.
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